The MBioEX Wood Pellet Bidding Platform

By Kevin Triemstra | October 24, 2012

In August, the Minneapolis Biomass Exchange proudly released the first wood pellet bidding system in the country, which works anywhere wood pellets can be found within the continental U.S. From our point of view, one problem with the wood pellet industry is that the buying, logistics, and quality control processes are complicated.

When dealing with a buyer, pellet mills must be assured of credit since they will often send out supply trucks without receiving payment up front. Getting familiar with each buyer and working through credit hurdles takes time. Once the buying process begins, either the buyer or seller has to arrange transport, even though neither party is in the transport business. Collecting quotes takes time, and once they are received from the transporters, the purchase price from the mill will adjust as well since there is only a maximum delivered price the buyer is willing to pay. Additionally, the buyer has to be assured that quality exceeds a minimum level. Since every mill manufactures a slightly different pellet, this can be confusing to buyers as they approach multiple mills for purchases.

Coming from an information technology background where automation and efficiency is the norm, we at MBioEx wondered, “why can't buying occur with a few clicks?” That’s how the bidding platform got its start.

So how does it work? The service for buyers is simple: they enter the price they are willing to pay per ton for delivered pellets, the number of tons they would like to receive (bids are more likely to be accepted if they are ordered by the truckload in multiples of 22 tons), and credit card payment information (for authorization purposes only), or set up a line of credit through MBioEX. If they choose the credit card route, they will not be charged unless a mill accepts their bid. Once these basics are setup, bids can be submitted to pellet mills.

Upon bid submittal, the MBioEX software automatically determines transport costs and subtracts them from the bid, and then sends resulting bids to pellet mills, which will compete to be the first to accept the bid. If the bid is too low, it will simply expire after 24 hours. There are no penalties for unaccepted bids; one only pays for seller-accepted transactions. The service does not allow you purchase a particular brand of pellet, but does guarantee minimum quality specifications.

So who benefits? The system was organized in a manner to both save costs for buyers and increase seller profits through software automation and supply chain cost reduction. It assures buyers will receive quality-controlled pellets at a competitive price. Similarly, sellers no longer have to organize logistics and perform credit checks on buyers since the transaction is either prepaid or credit is assured. Overall, mills now have an opportunity to sell a commodity in a way that allows them to sell more volume and utilize excess capacity.

To find out more, we have provided a list of frequently asked questions on the bidding platform web site. We’d like to thank the pellet mill stakeholders across the U.S. for their time and overall enthusiasm toward innovating and increasing the industry’s prospects.